The new FinCEN requirements are intended to help prevent money laundering.

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The Treasury Department’s Financial Crimes Enforcement Network reminded financial institutions on Friday that its final customer due diligence rule is now effective.

The Financial Industry Regulatory Authority recently amended Rule 3310, its Anti-Money Laundering Compliance Program rule, to reflect FinCEN’s adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions.

The CDD Rule has four core requirements, requiring “covered financial institutions” to establish and maintain written policies and procedures that are reasonably designed to:

identify and verify the identity of customers;

identify and verify the identity of the beneficial owners of companies opening accounts;

understand the nature and purpose of customer relationships to develop customer risk profiles; and

conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

FinCEN issued the CDD Rule, which amends Bank Secrecy Act regulations, to improve financial transparency and prevent criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains.

The rule’s controversial new requirement to obtain beneficial ownership information means financial institutions will have to identify and verify the identity of any individual who owns 25% or more of a legal entity, and an individual who controls the legal entity.

Melanie Waddell

Melanie is Washington Bureau Chief, Investment Advisory Group. She also covers regulatory and compliance issues and writes The Playing Field column and Human Capital briefing. Reach her at mwaddell@alm.com. On twitter: @Think_MelanieW

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